Business Insider Report Slamming Agents Relies on Faulty Numbers

by Doug Gollan
Business Insider Report Slamming Agents Relies on Faulty Numbers

“Travel agents are a relic of the past—and hotels could be next,” reads a Grinch-like headline from a Business Insider report last week. However, the writer of the story backed off on the article’s claims when confronted by Travel Market Report.

The Business Insider article was based on a newly released McKinsey report titled “Digital America: A Tale of the Haves and Have-Mores” in which the consulting firm showcased major occupations that are being disrupted by the e-economy. In that report, McKinsey said that the number of travel agents in the U.S. is now less than half what it was 15 years ago.

“Digital capabilities, adoption, and usage are evolving at a supercharged pace,” McKinsey stated. “While most users scramble just to keep up with the relentless rate of innovation, the sectors, companies and individuals on the digital frontier continue to push the boundaries of technology use—and to capture disproportionate gains as a result.”

Noting that in many cases technology can replace current jobs, McKinsey said it had analyzed more than 750 occupations in the United States to determine the percentage of time that could be automated by currently demonstrated technology.

The statistics McKinsey used in its report about the number of travel agents are from the U.S. Department of Labor, but they do not include what ASTA estimates is at least 40,000 independent contractors working as travel agents in the U.S. In other words, the McKinsey report, as well as the chart published by Business Insider, underestimated the true number of travel advisors by nearly 40%.

It would appear that McKinsey left out inconvenient facts about the true size of the retail travel agent market. Travel agents are mainly small and medium-sized enterprises that usually don’t have the big budgets to spend on big name consulting firms, nor need the services of a large consulting firm like McKinsey. In contrast, large digital companies spend lavishly on consulting firms and use reports of this type to convince investors that they can become profitable.

When asked about the incomplete numbers in the chart he posted, Matt Rosoff, the reporter who wrote the Business Insider article, said it was for a feature called “Tech Chart of the Day,” and his story was based on “one single chart.” He said his website is “always open to people who have good stories.”

Rosoff said he was not aware that the McKinsey report failed to include travel agents who are independent contractors. “I mainly cover technology,” he said, adding that he was unaware of other research about travel agents, such as MMGY’s Portrait of American Travelers, which has shown use of agents has been growing for four consecutive years. The MMGY report also showed usage of online travel agencies (OTAs) is falling despite billions of dollars spent annually in marketing.

For its part, the McKinsey report lauded OTAs, saying: “They spur price competition by making all of the traveler’s options more transparent, and they have disrupted the fragmented network of travel agents that once brokered many transactions.” It noted that OTA revenue has increased from $14 billion to $150 billion since 2001.

But the McKinsey study makes no mention of the mounting complaints against OTAs by disgruntled consumers, nor does it mention recent legislation targeting online travel agencies. It also doesn’t include a recent Google study that found it takes 32 visits to 10 different websites for the average consumer to book an airline ticket.

McKinsey also failed to mention how consolidation has compacted the ranks of OTAs or how large players in the hotel industry, concerned about OTA fees and commissions that can amount to more than 30 percent of the retail price, have been heavily pushing consumers to book away from the OTAs. That, in turn, has helped travel agents gain ground, according to our own Travel Market Report story.

Perhaps travel agents can take comfort that McKinsey also believes hoteliers may be in the same boat as them as Uncle Joe’s spare bedroom is now being marketed as top accommodations through Airbnb. Of course, McKinsey failed to note in its report that Amazon came and left the travel-booking arena and Hotel Tonight is reportedly up for sale after massive layoffs. Neither “case studies” were included in the report.

Fortunately, with travel schools reporting record demand and travel agents saying 2015 was a banner year, it’s unlikely the Grinch at McKinsey, or the article in Business Insider, spoiled agents’ holiday cheer.

Pic: Rene Ehrhardt

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